Bank on the buffers SHDL: But check the fees and limits

Banks make much of overdraft 'buffer zones' that allow people to dip into the red without paying fees or interest. But many are so small that they are practically useless.

Standard current account holders with Alliance & Leicester Giro, Lloyds and TSB escape interest charges only if they go less than £10 overdrawn.

Nationwide is only marginally more generous with a £20 limit before interest charges start to bite.

Citibank customers can overspend most up to £500 - before paying interest or fees on overdrafts, while FirstDirect and Co-operative are the most generous of the mainstream banks, both offering buffer zones of up to £250.

'Offering it automatically to all customers saves them time and money on phone calls, arrangement fees and excess charges.' Several banks, including Royal Bank of Scotland, offer buffer zones on a discretionary basis.

Many offer decent buffers only to customers paying monthly fees for newer 'full service' current accounts.

Barclays, for example, offers ordinary customers a £20 buffer zone while those who pay £5 a month for an Additions account are allowed £100.

Abbey National is revamping its current accounts in January to bring in an automatic £50 buffer zone.

Abbey's head of banking Mark Murphy says: 'We realised customers wanted more flexibility and control and that is why we are introducing a buffer zone.

'We are also cutting the time it takes a cheque to clear when it is paid into an account because we know customers want easier access to their funds.'

One Abbey customer looking forward to the change is Nikki Salih, 23, a secretary from north London.

She says: 'I've always been happy with my account because it seems to be much more flexible than those some of my friends have with other banks.

'I'm saving to get married in July so I try not to spend too much or be overdrawn. I like to be able to dip into the red without fees if I need to.

'If I wasn't receiving the service or flexibility I needed I would not hesitate to switch to another account.' Customers who slip into the red occasionally and who want the flexibility of a buffer zone should avoid current accounts from Bank of Ireland, Halifax and Yorkshire bank, which do not offer them.

However, whatever account you have, it is worth asking for a fee-free overdraft facility to be set up in case the balance slips beyond any buffer zone.

Interest and charges on authorised overdrafts may be high, but are still less than half those imposed for unauthorised borrowing.